British expats with savings under £85,000 have been spared from being taxed by the Cypriot government in a last-minute EU deal.

But it means that any of the island's 60,000 British expats who break the threshold will be subjected to the compulsory one-off levy.

Cyprus was saved from a banking system collapse and bankruptcy in the early hours of Monday morning when eurozone ministers agreed a draft rescue package of £10 billion euro (£8.5 billion).

The UK Government has previously said it will only compensate British armed forces personnel left out of pocket.

Under the plan, Cyprus's second-largest bank, Laiki, will be restructured and holders of bank deposits of more than 100,000 euro (£85,000) will have to take losses, said Jeroen Dijsselbloem, who chaired the meeting of the 17-nation eurozone's finance ministers in Brussels.

British expats on the island had faced an anxious wait throughout the bailout negations this week after the Cypriot government pulled out of plans to tax every bank account in the country.

Banks have been closed for more than a week with customers now only able to withdraw 100 euro (£85) a day.